Super Microcomputer (NASDAQ:SMCI)Once one of the biggest winners in the market riding the AI ​​hype wave, it has been embroiled in so much drama lately that it’s hard to keep track. In the past week alone, the stock has almost halved in value and is now 78% below its peak from earlier this year.

The recent meltdown follows the resignation of accountant Ernst & Young, shortly after SMCI announced a delay in filing its annual 10-K report. To add to the uncertainty, reports suggest the company is also under investigation by the Department of Justice.

All of this makes the current fiscal first quarter results (which come out after the close) take a back seat to a more relevant investor question: What the heck is going on here?

More specifically, says Matt Bryson of Wedbush, an analyst who ranks among the top 2% of Wall Street stock experts, investors would like to know whether SMCI can prevent the stock from being delisted.

Starting September 17, the company was given 60 days to submit a viable plan to the NASDAQ to regain compliance by filing its fiscal 2024 10-K. If NASDAQ approves SMCI’s plan, it could have up to 180 days from the original August 29 deadline to file the 10-K. But since the company now no longer has an accountant, Bryson believes it “arguably appears to be an uphill battle for SMCI to remain publicly traded at this time.”

Another relevant question that needs to be answered is whether there is a major problem with the financial figures and management behavior. The company had previous accounting issues, but these were minor and involved only small shifts in revenue between quarters, with the main issue in 2018 being the delisting. SMCI has said it does not expect to have to restate its quarterly reports for fiscal year 2024, suggesting there are “no issues with the financial sector.” However, EY’s resignation and the WSJ article citing a DOJ investigation suggest to Bryson that “investors should consider the risk that a larger problem could exist.”

Finally, investors would like to know if the company can maintain its 2024 sales forecast as it is, and given all the news flows, what impact will this have on the company? Before the latest issue, there were indications that demand for liquid cooling was not as strong as expected, with Bryson noting “mixed feedback” on whether late filing concerns and the reported DOJ investigation are impacting customer decisions.

“But on net,” the five-star analyst summarized, “given the above, we are more cautious on SMCI’s ability to meet or exceed expectations for FQ1, or reach consensus for FQ2.”

In short, Bryson gives a Neutral rating on SMCI stock while lowering his price target from $62 to $32. Still, there is a potential upside of ~21% over current levels. (To view Bryson’s track record, click here)

Among his peers, nine other analysts are on the sidelines, while three additional Buys cannot change the Hold consensus rating. Meanwhile, some analysts have yet to update their SMCI models and as such the average price target remains very optimistic; at $61.76, this figure makes room for an annualized return of ~132%. (To see SMCI stock forecast)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is for informational purposes only. It is very important to do your own analysis before making an investment.